Waterdrop (WDH) Q1 2026 Earnings Transcript

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DATE

Tuesday, June 16, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Peng Shen
• Insurance Business Head — Wei Ran
• Healthcare and Crowdfunding Business Head — Xu Xiaoying

TAKEAWAYS

• Total Revenue -- ¥1.24 billion, up 64.8% year over year, with insurance-related income contributing ¥1.15 billion at 74.1% year-over-year growth.
• Net Profit Attributable to Ordinary Shareholders -- ¥98.4 million, down 9.1% year over year, reflecting a divergent trend from operating profit.
• Operating Profit -- ¥79.95 million, representing a 5.3% year-over-year increase.
• Insurance Business Operating Margin -- 13.3% for the period, with a 2 percentage point sequential improvement due to proactive channel optimization.
• Sales and Marketing Expenses -- ¥541 million, significantly higher than ¥172 million in the prior year period, attributed to escalated marketing and traffic investment.
• Cash and Equivalents -- Approximately ¥2.88 billion as of March 31, 2026, providing ample liquidity.
• Capital Return -- Cumulative share repurchases and dividends since IPO totaled approximately $170 million as of May 2026; the fifth cash dividend of $10.8 million was completed in early May.
• AI and Digital Transformation -- Filed 75 LLM-related patent applications, including 9 international, and began applying new AI technologies to insurance operations such as intelligent customer service and claims.
• User Growth -- The insurance segment drove total revenue growth via public domain user targeting and AI-driven channel efficiency.
• Product Development -- Disability insurance products delivered ¥89 million FIP, while pre-existing condition product FIP grew 24.3% year over year.
• AI User-Facing Applications -- Contributed an incremental 17.7% in premiums sequentially from Q4 2025, with over one million service interactions per month now handled by AI agents.
• Healthcare and Medical Crowdfunding -- The Waterdrop Medical Profiling Platform reported 3.75 million cumulative patients aided and a total of ¥73.5 billion in cumulative donations by March 2026.
• Clinical Trial Platform -- 15,500 cumulative patient enrollments and 53% year-over-year growth in newly signed projects in Q1.
• Operating Costs and Expense Growth -- Total operating costs and expenses were ¥1.16 billion, up 71.5% year over year, with operating costs up 30.1% and notable increases in referral, message service, and personnel costs.
• 2026 Outlook -- Management targets approximately 40% top-line growth for 2026, with operating profit scale expected to remain broadly stable as marketing investment rises.

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RISKS

• Xu Xiaoying stated, "the net profit attributable to all investor shareholders was approximately 98.4 million, down 9.1% year over year," signaling that rising expenditures have outpaced profit growth despite revenue expansion.
• Sales and marketing expenses increased by RMB 369 million year over year, which "Mainly because we progressively scale up traffic investment over the past year and reinforced workforce momentum."

SUMMARY

Waterdrop (NYSE:WDH) delivered rapid top-line growth, driven primarily by insurance-related income and strategic AI deployment. New data indicates record cumulative platform engagement and a sharp increase in marketing and operating expenses. Management's guidance for 2026 emphasizes aggressive marketing to support continued expansion, with profitability forecasted to remain steady despite rising costs.

• Peng Shen said, "For 2026, we are targeting approximately 40% top-line growth with operating profit scale is expected to remain broadly stable," highlighting a priority on volume over immediate earnings growth.
• Capital returns remain a consistent corporate strategy, as evidenced by ongoing share repurchases and the fifth consecutive dividend since IPO.
• AI-native initiatives contributed tangible efficiency gains, with automation now managing over one million user interactions monthly and supporting internal productivity accelerations.
• Healthcare and clinical trial verticals show expanding reach, reflected in key partnerships, patent grants, and material growth in newly signed projects.

INDUSTRY GLOSSARY

• FIP: First year insurance premium; a core metric in insurance distribution reflecting premium income from newly written policies.
• LLM: Large Language Model; advanced AI model type used for natural language processing and automation tasks.
• CRO: Contract Research Organization; firms that provide outsourced research services for the pharmaceutical, biotechnology, and medical device industries.
• Shuidi Hulian: A branded insurance product line or platform focused on cancer-specific insurance solutions within Waterdrop's portfolio.
• WeCom: Tencent's corporate communication and office collaboration platform, used by Waterdrop for customer and consultant interactions.

Full Conference Call Transcript

Peng Shen: Dear investors and analysts, thank you for joining Waterdrop's first quarter 206 earnings conference call. In the first quarter, we continued our last year's growth momentum with total revenue of 1.24 billion yuan at 64.8% year-on-year, and net profit attributable to ordinary shareholders of more than 98 million yuan. Since the first quarter of 2022, we have maintained a gap-proof visibility for 17 consecutive quarters. By second, our insurance business continues its user acquisition strategy with insurance-related income at 74.1% year-over-year. As these capabilities have been validated, we sharpened our focus on user experience while continuing to optimize our traffic channels and user-targeting efficiency.

The Khorfani distance remains stable, having raised the medical cost for a cumulative 3.75 million patients by the end of the Q1. And our digital clinical trial solution business is the standard enrollment growth, with more than 15,500 patients enrolled to date. On the technology front, we are accelerating our shift toward an AI-native company. As of March 31, 2006, we had filed 75 LLM-related patent applications, including nine international ones and were recently granted two more national invention patents in intelligence, semantic understanding, and the multimodal recognition. These technologies will be progressively applied to the insurance scenario, such as intelligent customer service and claims, improving service quality and efficiency.

On capital returns, we continue to share our growth with our shareholders. In early May, we completed our fifth cash dividend since our IPO, totaling approximately $10.8 million. Our share repurchase program also continued steadily. By the end of May 2006, we had repurchased approximately $61.8 million ADF in open market for about $120 million. As of the end of May 2006, cumulated cash dividends and share repurchases since ICO had totaled approximately $170 million. Meanwhile, we remain committed to giving back to society. At the end of the Q1, the Waterdrop Charity platform had partnered with 119 public charitable organizations and launched over 15,500 charity programs.

Looking ahead, we aim to seize industry opportunities and make growth our top priority this year. Building on our proven user-targeting capabilities, we will increase marketing investment further. For 2026, we are targeting approximately 40% top-line growth with operating profit scale is expected to remain broadly stable. We expect this current investment to allow greater profit potential in the coming years, and the user-based extension will further support the company's long-term development. And that covers our overall performance in Q1. Next, I will walk through each of those business segments in detail.

Wei Ran: Hello everyone, this is Wei Ran. Let me walk you through the progress of the insurance business. In the first quarter, insurance-related income reached $1.15 billion at 74.1% year-over-year, with operating profit of $115 million. The operating margin of Q1 is 13.3%. The year-over-year top-line growth mainly reflects a continuation of our last year user acquisition strategy. In the first quarter, we continue to step up public domain user targeting and increase our investment in traffic and AI, driving significant premium growth. On a quarter-over-quarter basis, while the income declined, our insurance operating margin rose by 2 percentage points. This was mainly because we proactively cut some lower ROI channels during this quarter.

At the same time, we are actively expanding into other high-quality traffic channels while running our mature ones with refined operations, enhancing our traffic infrastructure, and optimizing our model to drive continued improvement in ROI. On the supply side, we are committed to giving users more diverse product offerings, which continue to earn user recognition. During this quarter, FIP from our pre-existing condition products about 24.3% year-over-year, and the disability insurance products contribute $89 million in FIP. At the product level, we continue to iterate. For example, we upgraded our inclusive cancer worry-free medical insurance service, extending the coverage for out-of-the-hospital prescriptions and related medical devices, as well as the as well as a range of advanced cancer therapies.

We also recently launched the Shuidi Hulian focused cancer-specified GV products with a singular health discloser and a lower the bar to lifelong cancer protection. And on the service side, we took multiple steps to improve the customer experience. We launched a dedicated customer complaint hotline make it easier for users to raise concerns and we also connect the payment channels with our customer service system, expanding frontline operations and enable faster refund processing. And for elderly customers, we simplified procedures for the children acting on their behalf and introduced a faster track service channel. Together, this initiative upgraded our access balance service capability.

We also continued to apply our LLM capabilities and AI tools to streamline the workflow and improve operating efficiency. The user-facing AI applications contributed approximately 87 them in incremental premiums in Q1 at 17.7% sequentially. Through real-time support on our mini-programs, WeChat, phone calls, and WECOM, including our AI Pro insurance and AI medical insurance experts, WECOM AI, and other tools. For our frontline consultants, Kui Yi Zuo AI had handled more than 10,000 underwriting inquiries to date. In late March, we began internal beta testing of the cloud copilot on CRM and WECOM, bringing together our product knowledge base, the Creedo AI, and the other two agent tools.

So our consultants can get instant answers on products, underwriting, and other common questions with lots of switching between the systems and documents. Cloud Copilot also supports the self, the easy review, top track replay and refinement, and performance analysis. And after self-service, our AI user service agent now in regular operation supports more than 1 million service interactions per month. And the AI service quality Copilot continue to deliver efficiency of more than twice in a manual-only basis through this baseline. On the AI infrastructure side, our low-cost platform, Waterdrop Digital AI, now offers more than 30 purpose-fueled agents, each tailored to a specific scenario for our internal team and external clients in all the user-facing work.

So, that concludes our insurance business update for the first quarter.

Xu Xiaoying: Thank you, Yuan. This is Xu Xiaoying. And now, next, I will walk you through our first quarter performance on our card bonding and the healthcare business. As of the end of March 2016, approximately 494 million people had cumulatively donated a total of $73.5 billion to 3.75 million patients through the Waterdrop Medical Profiling Platform. This quarter, we pursued two priorities for Waterdrop Medical Profiling. The AI capability viewing and better service in linguistic diverse regions. For AI review, we complete an quarterly upgrade involving towards an AI-assisted model without compromising risk control quality.

Our RISC model can structure the content materially quickly and applies the preset rules for preliminary screening, short-term intake and the first-class review and treat our RISC specialists for complex cases. Secondly, we improve the service for patients in linguistically diverse communities, including areas where a minority language widely spoken and this quarter we systematically refined our service workflows and adapted the review standard to their real needs. We added a minority language specialist to work alongside our existing campaign consultants on upfront consultation and the document guidance and the dispute resolution and reducing the communication cost that caused by language barriers.

In addition we set up a dedicated service team in which the translator and the risk control specialist can track each case end-to-end and promptly resolve the bottlenecks, ensuring a strict risk control compliance while respecting local culture sensitivity. Turning to our healthcare business, we sustain a high quality growth this quarter, broaden LLN application across the core business scenarios. We partnered with 243 pharmaceutical companies and CROs and initiated services for 128 new programs. Our e-fund platform's single-quarter patron enrollment rose 16% year-over-year, and the newly-signed project in this quarter increased 53%, reflecting the wider partnership coverage and the deeper client engagement.

As of the end of the first quarter of 2006, the platform had cumulatively enrolled over 15,500 patients. In January 2006, our intelligent drug patient matching technology secured a national invention patent, which is the first of this kind in China. This quarter, we focused on building up our upstream data structuring capability and connecting it with the matching in game. Across part of our service workflow, the platform has now established a standardized pipeline from the data structuring to intelligent product matching, promptly generating suitability recommendation against the trial protocol.

Supported by these AI capabilities, we continue to build our case library, medical case library, and complex indications in rare cancers with a more balanced mix across therapeutic areas, strengthening the foundation for sustainable mid-term to long-term growth. And that covers our core funding and the healthcare businesses. I will now get through our financial headlines for the first quarter of 2016. Before I go into details, please be reminded that all numbers quoted here will be in Renminbi, and please refer to our earnings relist to pull detailed information on our financial performance on both year-over-year and quarter-by-quarter basis, respectively. In the first quarter of 2006, Waterdrop's total revenue reached $1.24 billion, up 64.8% year-over-year, sustaining rapid growth.

In fact, second, the insurance related income contributed approximately 1.15 billion at 74.1% year-over-year, while the non-insurance business together accounted for about 7.8% of total revenue, with corresponding services of approximately 60.73 million, and digital clinical trial solution income of approximately 24.2 million. And the cost, our total operating cost and expenses for this first quarter were approximately 1.16 billion at about 71.5% year-over-year. Operating costs for this quarter reached 487 million at 30.1% year-over-year driven by our business extension. Cost of referral and services increased by about $53.9 million, while short-message service costs and the personal costs arose by $38.9 million and $17.3 million, respectively.

Sales and marketing expenses reached $541 million, a significant increase from $172 million in the same period last year. Mainly because we progressively scale up traffic investment over the past year and reinforced workforce momentum. Marketing expenses for third-quarter traffic channels rose by approximately $361 million year-over-year. General and administrative expenses were $71.7 million, down 4.3% year-over-year mainly due to the lower professional services this quarter. and development expenses were about 62.7 million, an 11.5% year-over-year increase, currently due to an approximately 6.7 million right in cloud and the technology and the technical services. For the third quarter, operating profit was around 79.95 million, a modest year-over-year increase of 5.3%.

However, affected by the net operating action in this quarter, the net profit attributable to all investor shareholders was approximately 98.4 million, down 9.1% year-over-year. As of the end of March 2026, the company maintained an anvil cash reserve with cash and cash equivalents, short-term investments, and other cash positions totaled about approximately $2.88 billion.

And on the capital return since our IPO through May 1st, 2026, we accumulated a repurchase total of approximately $61.8 million for about 120 million U.S. dollars and it recently completed a tax dividend over approximately $10.8 million.Overall, the growth momentum of our core business agreement is strong and in the first quarter, Waterdrop delivered 64.8% year-over-year revenue growth and by stepping up the investment in traffic and AI, continues to strengthen our long-term competitiveness.

Operator: And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

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